Tuesday, June 21, 2005

The Smell Test

Thomas Heath has a front-page article on the Nationals financial sheets and indicates that the team is expected to make a $20 million profit. Last year, split between Montreal and Puerto Rico, the team lost $10 million.

While that's obviously great news in that it shows that DC is capable of supporting a team, it seemed a little fishy when I thought about it -- as are most of the numbers MLB trots out.

A $30 million swing certainly seems like a lot, but the more I thought about it, the more I thought that that might even be an underestimate.

I'm basing this on two aspects of local revenue: media contracts and ticket sales.

First, media contracts. We know that the Nationals are receiving about $20 million from MASN. We don't know how much the radio contract is, but it was a revenue-sharing deal that's probably significantly less than that.

I can only find 2001 numbers for Montreal. But, it's probably safe to say that they're not all that different -- there certainly wasn't a growing demand for Expos broadcasts. Then, they earned less than $1 million, in part, because they had no English-language broadcast agreement. (Imagine that! A team's local fans were unable to watch their team play!)

Even accounting for the Nationals radio deals and increases in Montreal's contracts, that's about $15 MM of the increase right there.

Last season the Montreal Expos drew just under 750,000 fans (split between Canada and PR). Certainly ticket prices were cheaper. But, for the sake of argument and for conservative numbers, let's say the $24 figure was the average cost there too. That works out to $18 million in ticket revenue.

That's a conservative difference of $42 million in ticket revenue alone.

Add that to the $15 million from media, and there's nearly $60 million in additional revenue.

And that's before you throw in the increased concessions, parking, merchandising, advertising, etc.

The numbers don't quite add up.

Now certainly, part of the difference is a result of Montreal's extreme reliance on revenue sharing. I'm unable to find any recent numbers on that (if you find any, drop a link in the comments), but I've got to believe that it's probably in the $20-$25 MM range. And it's certainly possible that the Nationals will even have to pay into revenue sharing, accounting for a significant portion of the mismatch.

But, there's no accounting for that in the article. Either that's a failing on Thomas Heath's part, or that's MLB fudging with the numbers are per their usual.

But, would their motives be in screwing around with the numbers asks you?

How do you think the anti-stadium activists are reacting to today's news at the idea of a $20 million profit? It certainly can't be good, especially when you think of the schools and the children and puppy dogs with wet noses.

MLB is trying to walk a tight rope here. They want to present a rosy picture, especially to those about to pony up nearly half a billion dollars for the team. Yet, they don't want to give some of the more demagogic in the city any more grist than they absolutely have to.

Maybe the $20 million profit figure is correct. I just know from examining past dealings that you need to plug your nose anytime MLB starts throwing numbers around. Just call me skeptical.

8 Comments:

Only thing I can add is that the Post article acknowledged that they used very conservative math when coming up with the figures. I don't blame them as so many variables are guesses when dealing with MLB and at this point in the season.

I buy the $20 million profit figure. Though two things make me stop to think:

(1) if, in year 1 in the new market with a well below-average payroll, the team's only making $20M, are we going to hear belly-aching in year 3 when revenues are stagnant but payroll has increased and profits are <= $0? and,

(2) I don't buy that this $20M 'revelation' is going to have any impact on the sale price of the team, as is hinted at in the byline of the Post article, but now I'm straying from the point of the original post...